Fragmented Rooftop Solar Industry may see a Major Consolidation due to the COVID Onslaught

India’s solar rooftop industry is highly fragmented as is the case with the rest of the world with many small players existing in the market as large companies do not really have a huge edge given that installation of solar panels and associated electrical systems is a local affair managed by local electricians and specialized personnel. The Indian rooftop solar industry has hundreds of small players fiercely competing in a market with one of the lowest costs of rooftop solar energy installations in the world. Typical prices of installing a 10 kW system is only around USD 5,000-6,000 which is almost one-quarter of what it would cost to install a similar system in a developed country. Despite these low costs, the market is very competitive with a lot of small players vying for a piece of the roughly 2 GW market size, which is growing leaps and bounds as the cost of rooftop solar energy has become lower than that of the price of power which is procured from the grid.

However, the coronavirus situation is set to change the structure of this market as a lot of the small and medium-sized businesses may go bankrupt since they will not be able to survive the squeeze in liquidity as well as profits due to this economic crisis. This is a trend that is going to affect multiple industries where the small and medium-sized businesses may not have the cash and the resources to survive a once a generation crisis where business has dived to almost zero and for which there is no precedent.

The rooftop solar industry is organized such that the top companies only have a 25% share of the market with the rest dispersed between tons of mom and pop companies. With the economic crisis taking a huge toll on the income of people, all discretionary activities will take a hit over the coming year. Rooftop solar energy, particularly for residential customers, is not an essential activity. Even for commercial and industrial consumers, cash will be at a premium and they would not like to invest in new power equipment. This means that rooftop solar system capacity could see a degrowth in 2020 making it much more difficult for the smaller companies. Even larger companies will become more aggressive to capture market share as the overall market size shrinks. This could result in a big shakeout of the market where the bigger companies become bigger while the smaller companies are forced to leave the market entirely.

Also, read How should I Finance my Rooftop Solar PV System/ Project in India